Martek Reports Strong Third Quarter

08/09/06 Martek Biosciences Corporation has said for the 3rd Qtr 06, revenues of $70.4 million were achieved, compared to $39.5 million for the third quarter of fiscal 05 (3rd Qtr 05). For the 3rd Qtr 06, Martek generated net income of $5.3 million, or $0.16 per diluted share, compared to net loss of $100,000, or $0.00 per diluted share, for the 3rd Qtr 05. For fiscal 2006 year-to-date, revenues of $203.5 million were achieved, a 26% increase over revenues of $161.8 million for fiscal 2005 year-to-date. For 06 YTD, Martek earned net income of $17.2 million, or $0.53 per diluted share, an increase of 65% over net income of $10.4 million or $0.33 per diluted share for 05 YTD.

"Martek's strong third quarter financial performance and year-to-date cash flow are the results of the increased use of DHA- and ARA-enriched infant formula products around the world as well as growing consumer recognition of the key health benefits of Martek's oils for infants. We continue to work hard on our long-term plan to accelerate the use of DHA beyond infant formula. The early results of our efforts should be seen on store shelves over the next 12- 18 months in the form of a variety of new, DHA-enriched products available to consumers of all ages," stated Steve Dubin, President and Chief Executive Officer of Martek.

Total revenues for the 3rd Qtr 06 were $70.4 million, an increase from $39.5 million for the 3rd Qtr 05 (revenues for the 3rd Qtr 05 were adversely impacted by the previously disclosed buildup of inventory by certain customers). Martek said that contributing to its revenue growth in the 3rd Qtr 06 were continued sales increases in both the U.S. and international infant formula markets.

Gross profit margin percentage for the 3rd Qtr 06 was 38% compared to 35% for the 3rd Qtr 05 largely due to improved DHA productivity and a lower overall cost of ARA sold during the period resulting from yield improvements, favorable changes to the U.S. dollar to euro exchange rate and reductions in certain transportation costs.

Martek said that combined with an expected $1.5 million decrease in contract manufacturing revenues from the 3rd Qtr 06, total revenues are expected to be between $63 million and $66 million in the fourth quarter. This is a decrease from the 3rd Qtr 06 but represents an approximately 15% increase compared to the fourth quarter of 2005, and contributes to full fiscal year revenue growth of over 20%.

Martek said that it plans to purchase less ARA from its supplier, DSM, during 2006 than it purchased in 2005 in order to keep ARA inventory levels at targeted amounts. Consequently, ARA purchased in 2006 will have higher unit costs than that purchased in 2005. We expect improvement in ARA unit costs starting in calendar 2007 due to anticipated increased purchases of ARA in 2007 and certain other cost savings. From a gross margin perspective, Martek anticipates a 4% to 5% decline in product margins in the fourth quarter of fiscal 2006 as compared to the 3rd Qtr 06 with margins gradually improving beginning in the third quarter of fiscal 2007 as the higher cost ARA material is sold.

With respect to the food and beverage market over the next several quarters, the company anticipates more announcements of supply agreements with food companies that will position it for increased future sales of its oils. Martek also expects increased sales in fiscal 2007 of its oils to food, beverage and supplement customers for products developed and launched to promote cognitive function and cardiovascular health. We expect such sales in the food, beverage and supplement markets to begin contributing to overall sales growth during fiscal 2007. The Martek management believes that over the next few years, these non- infant formula sales will continue to expand and could ultimately represent a larger opportunity than infant formula.